JSW
Infrastructure, a part of JSW Group, is the second largest commercial port
operator in India in terms of cargo handling capacity. It develops and operates
ports and port terminals pursuant to Port Concessions.
Currently
it operates nine port concessions in India with an aggregate installed cargo
handling capacity of 158.43 MTPA as of June 30, 2023 (up from 119.23 MTPA as of
March 31, 2021) spread across spread across both west and east coast of India.
Its nine concessions includes two non major ports located in Maharashtra and
port terminals located at Major Ports located across the industrial regions of
Goa and Karnataka on the west coast, and Odisha and Tamil Nadu on the east
coast. With diverse maritime infrastructure the company meets its customers
diverse cargo needs across key location.
In addition to its operations in India, the company operates two port
terminals under O&M agreements for a cargo handling capability of 41 MTPA
in the UAE as of June 30, 2023. Majority of its assets have the natural
advantage of a deep draft enabling direct berthing of larger vessels like cape
size and post panamax vessels.
The
company has strong evacuation infrastructure at its ports and port terminals
that comprises of multi-modal evacuation techniques, such as coastal movement
through a dedicated fleet of mini-bulk carriers, rail, road network and
conveyor systems. Given its ports/terminals facilities and evacuation
infrastructure it offers various maritime related services including, cargo
handling, storage solutions, logistics services and other value-added services
to its customers, and are evolving into an end-to-end logistics solutions
provider.
Its
portfolio of assets caters to both exports (outward movement of cargo) and
imports (inward movement of cargo). For instance, its Dharamtar Port, South
West Port, New Mangalore Coal Terminal and Ennore Coal Terminal all cater to
raw-material import requirements and finished goods export requirements of JSW
Group Customers (Related Parties) while Jaigarh Port, Paradip Iron Ore Terminal
and Paradip Coal Exports Terminal predominantly handle outward cargo from the
mineral rich belts of Odisha to the various consumption centers.
Operations
of the company commenced in 2002 with acquisition of one one Port Concession at
Mormugao Port (Goa) and commenced operations in 2004 has now evolved/expanded
into a large maritime infrastructure company having developed/operate multi
cargo ports/port terminals numbering about nine as end of June 30, 2023 across
India. Its ports/port terminals are equipped to handle various categories of
cargo, including dry bulk, break bulk, liquid bulk, LPG, LNG and containers.
It
have developed two green-field Non-Major Ports, four port terminals at Major
Ports including a container terminal project in New Mangalore (Karnataka), and
have acquired three port terminals in India. Further it proposes to develop a
port at Jatadhar (Odisha) to cater to JSW Steel’s (“JSW Steel”) upcoming steel
facility in Odisha.
Ports
and port terminals operated by the company typically have long concession
periods ranging between 30 to 50 years, providing with long-term visibility of
revenue streams. As of June 30, 2023, the capacity weighted average balance
concession period of its operational ports and terminals is approximately 25
years with Jaigarh Port, one of its largest assets, having a balance concession
period of 35 years.
Port
Concessions of the company are strategically located in close proximity to JSW
Group Customers (Related Parties) and are well connected to cargo origination
and consumption points. This enables the company to serve the industrial
hinterlands of Maharashtra, Goa, Karnataka, Tamil Nadu, Andhra Pradesh and
Telangana, and mineral rich belts of Chhattisgarh, Jharkhand and Odisha, making
its ports a preferred option for its customers.
The
company has long-term contracts with JSW Group Customers (Related Parties) for tenure
of 10 to 15 years on an arm’s length basis for cargo handling services, some of
which have take-or-pay provisions which provide long-term visibility of cargo
and revenue. Under the take-or-pay
provisions, in the event the customer is unable to meet the minimum commitment
for cargo handling, the customer is required to pay the shortfall amount
between the tariff for the minimum commitment and the actual cargo handled. The
shortfall amount can also be adjusted against any excess in the volume handled
for the relevant customer in the future.
Additionally
the company has diversified its customer base to include third-party customers
across geographies and have expanded its cargo mix by leveraging its location
advantage and maximizing asset utilization. Its contract with third-party
customers are both long term (typically 5 years) and short term commercial
contracts that are generally for a term of up to one year or until completion
of evacuation of cargo, which may be renewed periodically.
Revenue
stream (revenue from operations) of the company is diverse including revenue from (i) providing cargo handling,
storage and related services such as evacuation, sorting, mixing and bagging to
both JSW Group Customers as well as third-party
customers, and (ii) vessel related charges such as berth hire charges, port
dues, pilotage and towage billed levied to shipping agents.
The
tariff charged by the company to the customers is typically governed by the
concession agreement for the relevant port or port terminal. Under some of its
concessions, tariff is escalated annually and is linked to the WPI and for
other concessions, the tariff may be determined by it based on prevailing
market conditions.
Of
the total cargo handled in Q1FY24, about 33.55% is iron ore, 32.22% is thermal
coal, 23.25% coking/steam coal, 0.59% is liquid/gas cargo, 2.52% is container
cargo, 7.87% is other bulk & break bulk cargo. Moreover the cargo evacuation infrastructure mix
is also diverse with 34.03% of the total cargo handled in Q1FY24 moved by rail,
21.64% by road, 16.47% by waterways and 27.87% by conveyor. In terms of revenue mix of the Q1FY24 revenue
from operations cargo handling accounted for 84.7% [JSW Group 51.02%; 3rd
Parties 33.68%] and vessel related charges about 15.3%. Revenue under O&M agreement is about
0.95% in Q1FY24.
The
Issue & Objects of the Issue
The offer comprises Fresh Issue of equity
share aggregating to Rs 2800 crore.
Of the net proceeds of fresh issue, the
company will be using Rs 880 crore towards Re/pre-payment (in full or part of
all/portion) of certain borrowings through investment in wholly owned
subsidiaries i.e. JSW Dharmatar Port (JDPPL) and JSW Jaigarh Port (JJPL); Rs
1029.035 crore towards financing capital expenditure requirements through
investments in JJPL for proposed expansion/upgradation works i.e. expansion of
LPG terminal (Rs 865.751 crore), setting up of electric substation (Rs 59.40
crore) and purchase & installation
of dredger (Rs 103.884 crore) at Jaigarh Port; Rs 151.049 crore towards
financing capital expenditure requirements through investments in JSW Mangalore Containter Terminal (JMCTPL), a
WoS for proposed expansion at Mangalore Container Terminal and balance towards
general corporate purposes.
Gross consolidated debt of the company as of
end June 30, 2023, was Rs 4228.387 crore and the net debt was Rs 1873.778 crore.
Strength
Demonstrated
project development, execution and operational capabilities in maritime
infrastructure industry that is capital intensive with long gestation periods
and several entry barriers due to significant regulatory requirements.
Strategically
located assets both in West and East coast of the country at close proximity to
industrial clusters (Including JSW Group Customers who provide sticky
cargo) supported by a multi-modal
evacuation infrastructure.
Strong
multimodal evacuation infrastructure allows the company to customized supply
chain solutions to its customers.
Benefit
from strong corporate lineage of the JSW Group. Apart from strong managerial
support, as a member of JSW Group, the company gets initial cargo from JSW
Group Customers (related parties) which
facilitated ramp-up of its assets and improved utilization of capacities. JSW
Group companies accounts for 63.4% of the total cargo handled by the company in
India in Q1FY24 and 66.63% in FY23.
Predictable
revenues driven by long-term concessions, committed long-term cargo contracts and
stable tariffs. Contracts with its JSW
Customers are typically long term in nature with a tenure ranging between 10-15
years. Some of the contracts have take-or-pay
provisions which provide long-term visibility of cargo and revenue at its
ports. Contracts with take or pay provisions
provides a minimum annual cargo volume commitment of 25.40 MMT that
represents about 27.36% of the volume cargo handled in India in FY23.
Barring
South West Port (SWPL) at Marmagoa Port Trust the remaining concession period
of all others were more than 15 years and upto 35 years.
East
Coast port/port terminal assets of the company contributed about 35% of the
total volume in Q1FY24 and FY23 with balance 65% coming from west-coast
port/port terminal assets.
Weakness
Rely
on concession and license agreements under PPP models from government and
quasi-governmental organizations to develop/operate its ports/port terminals
with a typical tenure of 30-50 years. O&M agreements are typically granted
for limited periods of up to five years.
Typically concession/license agreements do not provide for renewals. Inability
to win or extend/renew concessions tenure on equally favorable terms, failure
to comply with obligations/terms set out by these concession agreements or win
any new concession could affect the operations or growth of the company.
Environmental
clearance for capacity enhancement (at the existing berths operated by South
West Port (SWPL), a subsidiary company at the Mormugao Port in Goa) to
SWPL has been challenged before the
National Green Tribunal. Any adverse outcome in these litigations may impact
the growth of SWPL.
Raised
USD 400 million in January 2022 through 4.95% sustainability-linked senior
secured notes due in 2029, secured by pledging its shareholding in the
Subsidiaries i.e. Paradip East Quay Coal Terminal Private Limited, JSWJPL, JSW
Paradip Terminal Private Limited, SWPL and DPPL. In case of an event of default under Secured
Notes, the security trustee may invoke the pledge which would result in the
security trustee acquiring equity and management control over the
Subsidiaries.
Do
not own the JSW trademark/brand and it was used under Brand Equity Agreement
between the company and JSWIPL and entails non refundable royalty payment
equivalent to 0.25% of its quarterly net turnover/revenue.
Inability
to complete both ongoing brownfield (Expansions at Jaigarh Port and MTPL which
are proposed to be partly funded by net proceeds from the IPO) as wells as
green-field expansion projects on time may result in cost overrun.
Revenue
from operations from top 5/10 customers accounts for 54.21% and 61.94%
respectively.
Exchange
rate fluctuations could materially and adversely impact the business, financial
condition and results of operations with revenue received in foreign currency
for the company being 15.85% of total revenue from operations in Q1FY24.
Lack
of PPP opportunities in port sector or its inability to effectively bid for
projects in the future could impact the operations and financial condition.
Capacity
utilization of its port/port terminal capacity stood at 62.64% and 56.88% in
Q1FY24 and FY23 respectively.
Port
services as well as logistics operations may be disturbed/impacted by natural
disasters/ force majeure.
The
lack of an efficient transportation network and reliable transportation
infrastructure in India or inadequacies in the connectivity of its ports/ port
terminals to the Indian road and rail network may have an adverse effect on its
business and results of operations.
Iron
Ore and coal makes up about 89% of the total cargo volume of the company with
iron ore accounting about 33.55% in Q1FY24, 33.22% thermal coal and 23.25% coking/steam
coal. So slowdown in demand for electricity or steel in the country or increase
in domestic supply of coal through rail may impact the cargo volume.
Valuation
Consolidated
revenue for fiscal ended March 2023 was up 41% to Rs 3194.74 crore driven
largely by 49.81%YoY jump in volume of cargo handled in India by the company to
92.83 MMT and of which about 45.09% (or
13.92 MMT) of the overall absolute volume increase come from newly commenced
entities. However growth rate in value terms lower than volume terms for the
period is largely due to lower rate of revenue in case of newly commenced
entities. With operating profit margin (OPM) expand by 190 bps to 50.7%, the
operating profit (OP) was up 46% to Rs 1620.19 crore. The net profit after MI was
up 126% to RS 739.86 crore.
Consolidated
revenue for quarter ended Jun 2023 was up 7% to Rs 878.10 crore. With OPM stand
contract by 120 bps to 51.4%, the growth at OP moderated to stand at 5% to Rs
451.34 crore. After accounting for lower other income the PBIDT was up 4% to Rs
491.48 crore. The interest cost (net) was an income of Rs 15.75 crore (against
an expense of Rs 139.84 crore). The
interest cost is net of foreign exchange gain or loss. The forex gain for the
period was a gain of Rs 87.182 crore against a loss of Rs 69.139 crore. The
forex gain for the period was escalated-by/ includes Rs 77.975 crore
attributable to reclassification of earlier forex loss from the P&L
accounts to OCI on account of increase in effectiveness of cash flow hedge against
in corresponding previous period. Interest
cost excluding forex gain/loss was up by 1% to Rs 71.43 crore. Thus powered the
PBDT was up 53% to Rs 507.23 crore. The
depreciation was up 3% to Rs 94.74 crore. Thus the PBT was up 71% to Rs 412.49
crore. Eventually the net profit after MI was up 69% to Rs 320.89 crore.
For
TTM period ended Jun 2023, the consolidated net profit after MI was Rs 870.89
crore on a sales of Rs 3253.14 crore.
The
TTM EPS was Rs 4.1 and the PE on upper price band of offer price works out to
29 times. In comparison the Adani Ports Special Economic Zone (APSEZ) and
Gujarat Pipavav Port quotes at a PE of 24.1 times and 17.8 times of their EPS
for TTM period ended Jun 2023. The price/BV of the company stood at 3.5 times
compared to 3.9 times and 2.6 times of APSEZ and Gujarat Pipavav. While the
EV/EBITDA of the company was 15.7 times it was 20.2 times and 11.3 times for
APSEZ and Gujarat Pipavav Port.
JSW Infrastructure : Issue
Highlights
|
|
Fresh Issue (in Rs. Crore)
|
2800.00
|
Offer for sale (in Rs. Crore)
|
0.00
|
Price band (Rs.)*
|
|
Upper
|
119
|
Lower
|
113
|
Post-issue equity (Rs crore)
|
420.00
|
Post-issue promoter (including
promoter group) stake (%)
|
85.61
|
Minimum Bid (in nos.)
|
126
|
Issue Open Date
|
25-09-2023
|
Issue Close Date
|
27-09-2023
|
Listing
|
BSE, NSE
|
Rating
|
46/100
|
JSW Infrastructure: Consolidated
Financials
|
|
|
|
|
|
|
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
2206 (3)
|
2306 (3)
|
|
Sales
|
1603.57
|
2273.06
|
3194.74
|
819.70
|
878.10
|
|
OPM (%)
|
50.9
|
48.8
|
50.7
|
52.6
|
51.4
|
|
OP
|
816.44
|
1109.43
|
1620.19
|
430.99
|
451.34
|
|
Other income
|
74.69
|
105.68
|
178.11
|
41.42
|
40.14
|
|
PBIDT
|
891.13
|
1215.11
|
1798.30
|
472.41
|
491.48
|
|
Interest
|
227.86
|
419.62
|
596.09
|
139.84
|
-15.75
|
|
PBDT
|
663.28
|
795.49
|
1202.22
|
332.57
|
507.23
|
|
Depreciation
|
270.66
|
369.51
|
391.22
|
91.67
|
94.74
|
|
PBT
|
392.62
|
425.98
|
810.99
|
240.90
|
412.49
|
|
Share of profit from Associates
(SoPA)
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
|
PBT before EO & After SoPA
|
392.62
|
425.98
|
810.99
|
240.90
|
412.49
|
|
EO Exp
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
|
PBT after EO
|
392.62
|
425.98
|
810.99
|
240.90
|
412.49
|
|
Tax
|
108.00
|
95.55
|
61.48
|
48.35
|
90.29
|
|
PAT
|
284.63
|
330.44
|
749.51
|
192.55
|
322.20
|
|
Minority Interest
|
-6.76
|
2.49
|
9.68
|
2.72
|
1.31
|
|
Net profit
|
291.39
|
327.95
|
739.83
|
189.83
|
320.89
|
|
EPS (Rs)**
|
1.4
|
1.6
|
3.5
|
3.6
|
6.1
|
|
** on post issue equity (on upper
price band) of Rs 420 crore. Face Value: Rs 2
|
EPS is calculated after excluding
EO and relevant tax
|
|
|
# EPS can not be annualised due to
seasonality in operations
|
|
Figures in Rs crore
|
|
|
|
|
|
|
|
Source: Capitaline Corporate
database
|
|
|
|
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